European manufacturing: Smart is no longer enough.

In an ideal world, companies would run unified ERP and homogeneous datasets. But grown organizations rarely do. Raising the bar demands big investments (and C-suite debate). The machinery must also evolve from fully optimized, labor-light, fixed, 24/7 production lines, to flexible output enabled by AI, AGVs, and modular platforms. In the future, intent-based robotics will collaborate with people. No longer performing repetitive functions in isolated cages, they will learn and execute different tasks fast. Over the next decade, ongoing data analysis will drive constant evolution, rather than one‑off upgrades.

Data can even drive transformation in entire business models. Why are so many organizations still struggling with the basics?

The role of IT remains a bottleneck – even now

IT has gained ground over 20 years. Now it must take the final step from service provider (of access and infrastructure) to strategic partner, (rooted in data and analytics). Some CEOs are ahead of the curve: insisting that every problem‑solving team includes IT. Not just for technical fixes, but to determine how data can accelerate higher-order solutions.

What does this mean? Beyond asking data experts for support in informing investment decisions and dissolving system silos, C-suites must recognize their central role in business strategy - especially organizations who don’t believe they’re big enough for a dedicated CIO or CDO. But it is increasingly relevant to ask whether a CIO‑equivalent should be mandatory for mid‑caps. The smartest CEOs see IT as a driver of competitiveness, not cost.

Automation companies face a transition in their product offering

The real value of future automation solutions may lie not in the machines, but in their software. However, selling digital products demands shorter development and launch cycles, continuous feature releases, and a fail‑fast mentality. It’s a challenge for legacy manufacturers built on decades of predictable, high-quality serial production.

Stability can become a pitfall

C-suites can write the next chapter by attracting executives who fully embrace data and experimentation. Smart factory principles touch every part of the business, making data the new energy that fuels growth. While operational experience remains vital for industry leaders, every top role now needs not just a digital, but a data spike.

Global questions

Many are looking to China for answers. Here, factories are highly agile and decisive. Even factoring out labor costs, production lines often run more efficiently than in Europe; teams test ideas quickly and scale what works. Western organizations, especially legacy and family‑owned, can learn from this start‑up mentality (try fast, fail fast). But Europe must still balance efficiency with ESG commitments and workforce well‑being – all essential for long‑term stability.

Cross‑border recruitment is shifting accordingly

European organizations are increasingly drawing talent from Asia, Latin America, and CEE, with English as a working language. Consolidation is also accelerating, with external players acquiring European assets. But the flow is also moving the other way.

Energy costs, especially in Germany and Western Europe, are pushing organizations out of Europe, threatening energy‑intensive industries. Smart factories and AI do help, but without competitive energy prices, sectors like steel, glass, and aluminum may continue to leave the continent. Germany’s chemical sector is losing ground as production shifts elsewhere. This is a major challenge for European economies, which rely on controlling the full value chain from raw material to finished product. We must strive to keep these industries alive. Once Europe loses industrial value creation, it is lost forever.

Reinvention - a clear imperative for CXOs

Leaders historically grew in functional silos – marketing, sales, technology, operations. Talent strategies must reflect the need for a cross-functional data and AI perspective. Adaptability may trump past experience. Business models may change entirely – shifting focus from machine products to software services. The pressure is on, and many automotive and mechanical engineering companies are moving into defense to find new avenues for growth.

When recruiting for manufacturing clients, we still seek top candidates within the sector. But we scrutinize their open-mindedness and awareness of technological, societal, and cultural shifts. Otherwise, organizations risk the Nokia trap: doing everything right, yet failing because the market moved while their back was turned.

Today, not doing the wrong thing isn’t enough. A CEO must do the right thing, at the right time.

Leaders who focus only on keeping the old engine running risk missing new opportunities. The smart factory is not just a technological evolution. It is a leadership test. The future belongs to those who act early, learn fast, and build organizations where data, talent, and strategy move as one.